They’re Not Valentines

But the real-estate slowdown may not have an influence on tax bills.

City Hall sent out special greetings this week, but they weren’t Valentine’s Day cards. And they might not make their recipients warm and fuzzy. Real-property assessments were mailed to property owners on Feb. 12, and the deadline to make the first payment is June 15.

The overall value of real property in Alexandria, including both locally assessed real property and state-assessed public-service properties, has increased by $1.45 billion to a new total valuation of $34.24 billion. That’s an increase of 4.43 percent over 2006 values. Approximately 49.3 percent of the increase is the result of new construction. The remaining 50.7 percent, or $736.7 million, is the result of existing property value appreciation.

Considering the rapid growth that property values have been experiencing in the past several years, a 4-percent increase represents a considerable slackening. Residential assessments had increased at an average annual rate of 15 percent for single-family and 20 percent for condominiums during the six-year period from 2001 to 2006. But the signs of a slowdown have been emerging for several months.

In November, members of City Council learned that the city would have to set a 1.7-percent budget increase to avoid raising the tax rate. During their annual retreat at Tucker Elementary School, Mayor Bill Euille was forced to resort to his sense of humor to cope with the new economic reality.

“Is there a nurse in the house?” he asked. “I think I’m going to faint.”

A few days after the retreat, the City Council passed a target-setting resolution that established a goal of creating a city budget of $353.4 million and a school budget of $155.5 million. Last month, in a controversial five-to-three vote, the School Board exceeded their target by $7.3 million. But the city manager said that he is committed to adhering to the 1.6-percent growth target when he presents his budget later this week.

“The City Council passed a resolution that set forth a target,” said City Manger Jim Hartmann. “I’m going to meet that target.”

THE SLUGGISH property-value increases reflect a general weakening in the residential market during 2006. But city officials say that the weakening was offset by gains in the various commercial market sectors, a strong regional economy and continued employment growth in the city.

“What we saw was an unprecedented increase where we had double-digit increases for five years, so there were all sorts of predictions of the bubble bursting,” said Deputy City Manager Mark Jinks. “But it appears that the economists that predicted a soft landing were correct.”

Residential real property represents 59 percent of the total real property tax base, while commercial property and State Corporation Commission properties, such as utilities and railroads, represent the remaining 41 percent.

“For commercial properties, the assessments indicate that investors still have a high demand,” said Jinks. “We’re seen Holiday Inn and the Morrison House sold, and other commercial properties like the Winkler Properties were sold at higher prices that many observers thought would occur.”

Overall, the city’s residential tax base declined by $590.2 million, a 2.9 percent decline. This decrease was almost entirely offset by new residential construction, which added $424 million to the residential base, resulting in an overall decline of less than 1 percent in total assessments for residential property. The average assessed value for single-family homes and condominiums decreased by 2.9 percent to $509,593. The average assessed value for single-family detached homes and townhouses decreased by 1.26 percent to 660, 866. The average assessed value for condominiums decreased by 6.39 percent to $341,008.

“Condominiums are more like a commodity,” said Jinks. “They go up in value faster, and they come down faster.”

The overall value of the city’s commercial real property tax base increased for 2007 by 13.27 percent to a total of $13.18 billion. New construction accounted for $291.7 million of the increase, while appreciation accounted for the balance of $1.25 billion. Existing commercial properties increased by 10.8 percent, on average, with double-digit increases for multi-family rental, office, and hotels. The value of new construction, however, increased by 52.53 percent for 2007. Much of this increase is attributable to new, multi-family rental, office and hotel construction.